Advice For Recent College Grad Looking To Get Started In Real Estate.
I graduated from college just two years ago. I am currently working 50 hours a week between 2 jobs, a 8-5 and a night and weekend job. I am already tired of trading my time for dollars, making somebody else money. Since my combined income from both jobs is somewhere slightly over $30K a year, I still live at home with my parents. I am looking to move out of my parents house soon, but I really don't want to rent and pay somebody else's mortgage. I have been doing lots of research on real estate investing and I know that this is a path that I want to take with my life. I have excellent credit, but have very little cash to start investing. I would like to start investing in real estate and provide myself with housing. What would be my best option in this situation? Look for someone to lend me money for a down payment? Should I try to save up money for a down payment on a property? I would like to try my hand at a multi-unit (4 units or less) property since tenants will help pay the majority of the mortgage or positive cash flow and provide myself with shelter (rent 3 units, live in 1). Any suggestion will be extremely helpful here. Thank you.
There are many different niches in real estate, such as : wholesaling, rehabbing, L/O, Pre-foreclosures, REOs and the list keeps growing. Research the market in which you live and then try to focus on 1 or 2 of the niches mentioned above that would be lucrative in your state. It is always recommended that us beginners try wholesaling at first to see how everything works while increasing our knowledge and expanding our network. my .002 cents.
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You could work with a company that specializes in pre-foreclosures, collect a commission of 8% of the loan payoff .
Working with a company like this is great because you get to help people and create a positive cash flow to get you going.
Hey,
The idea of buying a 4 plex is a VERY good idea. You would get a ton of advantages (lower interest rate, small down payment, etc.) because it would be OO, but you would also get a nice cash flow. In fact you should be able to live for free, based off the three tenants.
On the negative side, being the landlord next door, might have some serious headaches.
If you find that you are okay with this, after a year you can buy another one (4 plex) and move it to that one. And so on....
If you put the property on your own tax return, you are comingling funds and will be an easy target.
So, let's imagine the following happens.
You rent the property and the tenant trips on a the front step. The tenant is laid up with a broken leg for 4 weeks and decides to sue. Because you *do not* hold the property in a legal entity, the tenants attorney sues for enough money, that you must sell your primary residence and all of your other assets that were listed on the common tax return in order to pay the judgement.
If you had talked to a good CPA or corporate attorney, they would have suggested you put your property in a legal entity, use separate tax returns, *and* you still would have gotten the benefits of the tax write offs.
Now, don't misunderstand me. I'm not picking on you, just trying to use a worst case scenario You can protect your personal assets from your business assets and gain additional tax benefits that you cannot get as a sole proprietor.
HTH,
Robert
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On 2004-09-09 00:28, robertt wrote:
If you put the property on your own tax return, you are comingling funds.
I already have the LLC articles of organizations. I'm in the process of fixing up the property (from transient thrashing) for our first tenants. I'm trying to open a bank account in the LLC name so that funds are not comingled. Also I'm thinking that I should write a promissory note to lend my husband the start up cost and down payment. This way when I transfer the deed, the LLC can pay us back the costs. Does this sound appropriate?
I think you should talk to an attorney/CPA that deals with corporations to make sure you cover yourself well enough. I'm not sure a separate bank account will protect you from the 'comingling of funds' issue, but I'm a newbie too, so someone else here might have some additional input.
Robert
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